G20 Summit: Multilateral Development Banks rejig, fair tax system key achievements

Finance minister Nirmala Sitharaman says the G20 India Presidency has been able to adopt “people-centric, action-oriented and far-sighted approach”

Revamping multilateral development banks (MDBs), global coordination in the regulation of crypto-assets, financial inclusion through digital public infrastructure (DPI), and efforts to develop a globally fair and sustainable tax system are among the seven key achievements of the finance track under the G20 India Presidency, said.

G20 Sherpa Amitabh Kant , External Affairs Minister S Jaishankar , Finance Minister Nirmala Sitaraman, DEA Secretary Ajay Seth and Chief Coordinator G20 Harsh Vardhan Shringla after the press conference during the G20 Summit. (Sanjeev Verma/HT)

The other three are debt resolution under a common framework, financing cities of tomorrow, and a mechanism to generate resources for climate finance, she added after the release of the Delhi Declaration on Saturday evening.

The Delhi Declaration, announced on Day 1 of the G20 leaders’ summit incorporates, on the finance track, almost all the issues the Indian presidency of G20 wished to address.

The G20 India Presidency has been able to adopt “people-centric, action-oriented and far-sighted approach” and “several outcomes of the finance track will certainly reflect these objectives” that “no one is left behind in our pursuit of global solutions”, the minister said.

Sitharaman said members unanimously accepted recommendations to restructure MDBs to meet challenges of the 21st century. In the declaration G20 members commit to “pursue reforms for better, bigger and more effective” MDBs “to address global challenges to maximise developmental impact”.

“Recognising the urgent need to strengthen and evolve the MDB ecosystem for the 21st century, we appreciate the efforts of the G20 Independent Expert Group on Strengthening MDBs in preparing Volume 1 of the Report and look forward to its examination in conjunction with Volume 2 expected in October 2023,” the declaration said.

While the issue isn’t new, it was India that gave it a definite shape by setting up an expert group led by former US treasury secretary Lawrence Summers and veteran Indian policymaker and 15th Finance Commission chair NK Singh. The framework suggested by the experts could potentially yield additional lending headroom of approximately $200 billion over the next decade, Sitharaman said.

Speaking about the second key achievement in finding a common ground for regulating crypto-assets, the FM said, “The global push for clearer policy for crypto-assets have gained momentum.” The declaration supported a “coordinated and comprehensive policy and regulatory framework” taking into account the underbelly of crypto assets, including money laundering and terror financing .

The third third was financial inclusion and productivity gains through digital public infrastructure (DPI). The minister said India has been able to successfully develop all the three “foundational” DPIs – digital identity (in its case, Aadhaar), real-time fast payment (the Unified Payments Interface), and a platform to safely share personal data without compromising privacy, she explained. The declaration also welcomed India’s plan “to build and maintain a Global Digital Public Infrastructure Repository (GDPIR), a virtual repository of DPI,” voluntarily shared with G20 members and others.

On the fourth issue , debt resolution, Sitharaman said, the declaration re-emphasised the importance of addressing debt vulnerabilities in low and middle-income countries in an effective, comprehensive and systematic manner. She said since 2018 only Chad could get its debt restructured under the mechanism . “Since India took over the G20 Presidency good progress has been made in the ongoing country cases under the common framework of debt treatment. And the three countries in that are Zambia, Ghana and Ethiopia,” she said.

“Beyond the Common Framework, we welcome all efforts for timely resolution of the debt situation of Sri Lanka, including the formation of the official creditor committee, and we call for the resolution as soon as possible,” the declaration said.

Financing the cities of tomorrow was the fifth point, the minister said. “We emphasise the need for enhanced mobilisation of finances and efficient use of existing resources in our efforts to make the cities of tomorrow inclusive, resilient, and sustainable,” the declaration read.

The sixth key point pertained to the two-pillar international tax package. International taxation is a complex area, involving multinational enterprises and, increasingly, digital businesses and transactions. The two-pillar model defines jurisdictions and recommends a basic minimum tax for multinational enterprises.

“We reaffirm our commitment to continue cooperation towards a globally fair, sustainable and modern international tax system appropriate to the needs of the 21st century,” the declaration said. Sitharaman said the group has made “substantial progress” in the two-pillar solution and work has also happened on the exchange of immovable property transactions between countries.

The seventh issue is the mechanism to support the timely and adequate mobilization of resources for climate finance. “We recall and reaffirm the commitment made in 2010 by the developed countries to the goal of jointly mobilizing $ 100 billion climate finance per year by 2020, and annually through 2025, to address the needs of the developing countries, in the context of meaningful mitigation action and transparency in implementation. Developed country contributors expect this goal to be met for the first time in 2023,” the declaration said.